India's 40 million shopkeepers brace for Wal-Mart effect

For such shop owners, who know of Wal-Mart only as a distant name associated with American economic hegemony, there is a need for education, say union leaders. "It's directly hitting the business of these sorts of people," says Amarjeet Kaur of the All-India Trade Union Congress.

The nationwide strike last week was a part of raising that awareness. On a bright winter's day, leftists and union leaders marched toward parliament, thronging a dilapidated truck draped in red Communist flags. From its creeping pulpit – amid cries of "long live the revolution" – Ms. Kaur proclaimed: "Not one East India Company but hundreds of foreign companies are coming to loot India."

It is an idea that still kindles many Indians to action. The previous government was tossed out in part because voters felt it was turning against its own people in favor of headlong free-market reforms. The government has changed, but for some Indians the perception hasn't.

"The foreign companies are exploiting the weaknesses of the Indian government and taking over the Indian economy in the same way as the East India Company did with the weak Mughal empire," says Bhatia, an animated government pensioner who displays the Indian ability to relate events separated by centuries with complete assurance.

Of course, that assertion is widely debated here. India still maintains many protections. For example, big foreign retailers like Wal-Mart are banned from opening their own stores here. Wal-Mart had to form a partnership with an Indian company, Bharti, to enter India.

The stores, expected to open next year, will be run by Bharti. But Wal-Mart plans to provide the logistical backbone. That way, when India removes its limitations on foreign investment – which is seen as inevitable – Wal-Mart will be able to move quickly, already having a network of distribution centers, as well as a refrigerated transport chain to bring foods to market.

Still, the effect on retailers is not a foregone conclusion. "The talk about mom-and-pop stores being closed overnight is a myth," says Asitava Sen, a retail analyst at PricewaterhouseCoopers in New Delhi, suggesting that Wal-Mart will not be in direct competition with them.

Indeed, Wal-Mart's discount strategy isn't always successful. The company announced earlier this year that it was pulling out of South Korea and Germany.

Somdutt, for one, hopes to adapt and survive. In the past 25 years, his store has changed from a tea shop to a packaging store, but it has always been the sole means of support for him and his family.

"In the past couple of years our business has gone down because of [malls]," he says, but adds with optimism: "Wal-Mart could set up [here], and it wouldn't make much of a difference. God will provide for everyone."

• Saurabh Joshi contributed to this report.

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